Happy Tariffsgiving! Why Americans Might Not Be Turkeys. Corona Trade Diplomacy. The Revolutionary Implications of #AI. Why Elite Jobs Filter Out The Underclass. Plus more! #235
And a parable of our times...
Grüezi!
1️⃣ Happy Tariffsgiving!
Why ‘talking turkey’ about inflation is also telling China to get stuffed.
Trump’s inflationary tariffs would hit American consumers and creditors.
But inflation would also be a potent geopolitical wrecking ball.
And it would hit China harder than the US.
Why? Because inflation would dismantle the delicate balance of China’s monetary “non-system” – the unofficial mechanism China uses to manage its currency against the dollar whilst keeping tight capital controls.
How would this play out?
If US inflation were to rise sharply, China would face three unhappy options:
Import destabilising inflation by maintaining the yuan’s link to the dollar.
Allow dramatic yuan appreciation, which would crush exports and risk a slowdown in economic growth.
Let the yuan float freely, risking large-scale capital flight and financial instability – something China’s been battling for years.
China’s previous abandonment of yuan internationalisation due to capital outflows shows how precarious this balancing act can be. A US inflationary shock could push China into a full-blown monetary crisis.
Geopolitical Risks and the Global Monetary System
The implications of this scenario extend far beyond the US-China relationship. A significant inflationary shock in the US could:
Force China to rethink its foreign reserve strategy;
Accelerate the development of alternative trade settlement systems, such as those based on the yuan or other regional currencies;
Increase currency volatility, particularly in emerging markets reliant on dollar stability;
See emergency capital controls as countries scramble to protect their economies.
The current international monetary system is not an organised structure but a fragile balancing act.
It relies on the dollar as the primary reserve currency, with other major economies, including China, maintaining monetary stability around it.
A sudden burst of US inflation? Not to be unleashed unwisely.
#Tariffs #Inflation #USEconomy #China #Currency #Geopolitics
2️⃣ 🍺 Hold My Beer: Mexico’s Hidden Economic Empire
The Trump tariff blow back…
Those Coronas also tell a story about China. When Trump announced 25% tariffs on Mexican imports (versus just 10% on Chinese goods), he wasn’t just thinking about beer – he was moving to close China’s backdoor into the American market.
The numbers tell the story. Mexico dominates 360+ U.S. supply chains, including:
83% of U.S. beer imports;
$28B in computers annually;
$24B in delivery trucks;
$12B in medical devices;
76% of agricultural equipment imports;
62% of auto parts.
The crucial part? Chinese manufacturers have mastered using Mexico to bypass US trade restrictions. In 2023, over 35% of “Mexican” exports to the U.S. contained significant Chinese components. They ship parts to Mexico, perform minimal assembly to qualify as "Made in Mexico," and enter the US tariff-free under NAFTA.
This explains Trump’s seemingly odd tariff structure. By making Mexican assembly more expensive (25% vs China’s 10%), he’s cutting off China’s most effective workaround. Chinese direct investment in Mexican manufacturing tripled between 2019-2024. Over 1,300 Chinese companies now operate assembly facilities in Mexico.
The challenge? These aren’t simple supply chains. Many products cross borders 5-7 times during manufacturing. A “Mexican” computer might contain Chinese chips, U.S. software, and Canadian testing – all before final assembly.
So while switching from Corona to Bud Light is easy enough, untangling Chinese-Mexican supply chains is a far bigger challenge.
The real question isn’t about beer – it’s whether the US can restructure three decades of integrated manufacturing without breaking its own system.
#Trade #China #Mexico #Manufacturing #InternationalTrade #Economics #SupplyChain #BusinessStrategy
3️⃣ Artificial Intelligence Will Turn Society Upside Down
AI will make meaningless how we reward everything.
AI doesn’t just threaten jobs – it challenges how our entire economy distributes wealth.
UVA economist Anton Korinek advises central banks and the IMF on technological change, and his latest paper will get you rethinking the conventional economic wisdom about AI disruption.
The problem? Our economy doesn’t just use wages to compensate work. We use the labour market to distribute economic rent – the surplus value in the system.
But think about medical and military staff, carers, even – yes, even politicians. Their wages – or lack of them – don’t reflect “market value.” They reflect social value, status, and embedded political assumptions about resource distribution. AI disrupts this entire social architecture.
In our current system economic rents flow through:
Job hierarchies;
Professional status;
Seniority systems;
Public sector pay scales.
None of these make sense in a post-labour world.
Korinek’s analysis demonstrates how technological change could unravel the very social systems we take for granted.
Our current system uses employment as proxy for:
Social contribution;
Resource distribution;
Social standing;
Life meaning.
We’ve tangled compensation and social worth together.
Korinek’s recommendations – adaptive policy frameworks, scalable UBI systems, new tax structures – address the symptoms. But his analysis points to deeper challenges.
The real question isn’t just how to compensate displaced workers. It’s how to structure society when labour markets no longer serve as our primary mechanism for distributing economic surplus.
4️⃣ How Fox News Moved American Voters
It tweaked them Republican – and in tight races, a tweak was all it took
What has Fox News done for American democracy? Maybe the question should be – what has it done for the Republican party? Researchers found that in recent elections Fox News viewing:
⬆️ Increased Republican voting by up to 0.6% in presidential elections;
⬆️ Boosted Republican candidates by up to 0.7% in Senate races;
⬆️ Led to 0.6-1.6% gains for Republicans in House elections;
➡️ Made viewers measurably more right-wing.
How big a deal are these micro-movements? 🤔
To put it in perspective: in a crucial swing state like Wisconsin, the margin of victory was less than 1%.
The methodology? Researchers analysed how a channel’s position in the TV lineup affects viewership. Just moving Fox News up in the channel lineup was enough to add 5.5 minutes of weekly viewing per household and produce these effects.
This isn’t about politics – it’s about understanding how media shapes our democracy. As someone interested in the intersection of information and society, I find these precise measurements of media influence remarkable.
#Politics #Media #Research #Democracy #DataScience
5️⃣ Angela’s Reputation in Ashes
Germany’s “Stability Chancellor” Created Europe’s Greatest Instability
“You can say: It was Merkel.” Everyone’s looking for a scapegoat for Germany’s industrial crisis and the former German Chancellor’s own words in a Der Spiegel interview make her an accidental volunteer.
The East German science PhD who prided herself on clear-eyed decision-making now looks to be the architect of her nation’s greatest strategic vulnerability.
The Merkel moves that reshaped German industry?
2011: Phases-out nuclear post-Fukushima, cutting 25% of electricity supply;
2014: Deepens dependence on Russian gas after Crimea is annexed;
2015: Calls direct Russian gas pipeline a “purely commercial project;”
2021: Leaves with Germany 55% dependent on Russian gas.
Merkel’s pursuit of stability through an energy partnership with Russia produced precisely the opposite.
Resisting paying pipeline fees to Ukraine and Poland? Saying no to US entreaties to buy its gas.
These would have been eminently reasonable moves in a neoliberal world of disinterested economic actors.
The consequences?
Second consecutive year of German GDP decline;
51% of big companies considering production shifts abroad;
Industrial production in systematic decline;
Car manufacturing, Germany’s industrial crown jewel, contracting 7.8% monthly.
For business and political leaders, Merkel’s shattered legacy has three key lessons:
Policy Traps: Long-term strategic decisions are binding. Merkel’s nuclear exit created a dependency that couldn’t be quickly unwound.
Security Matters: Energy policy is national security policy. Treating energy as just economics ignored geopolitical realities.
Innovation Dilemma: Germany’s struggle to maintain competitiveness shows the error of rewarding complacency.
German industry faces what its industry association – the DIHK – warns could be “lasting deindustrialisation.” Angela’s legacy is in ashes.
#GermanIndustry #EnergyPolicy #StrategicLeadership
6️⃣ How “Culture Fit” Keeps Poor Kids Out
90% of hiring discrimination happens in cosy final interviews…
Elite jobs go to the right folks thanks to rigorous interviews and ice cold evaluations, right?
Not quite. Research shows how leading multinationals filter out the less advantaged right at the end of the line.
In the Hiring Process: It’s during final interviews that assess “cultural fit,” that 90% of all hiring inequalities between socioeconomic groups pop up.
Early Stages, Equal Performance: When looking at resumes, doing skills tests, and group assessments, disadvantaged candidates who are qualified perform on a par with other candidates.
The Interview Barrier: Once they reach the personal interview stage, these same candidates see a dramatic 29% drop in their success rate compared to better off applicants.
Post-Hire Success: The few that do actually break through and get hired, outperform their peers – getting promoted 20% faster, including in the most competitive roles.
The findings raise important questions about how subtle social dynamics – AKA “people like us” – shape access to elite jobs.
#HiringPractices #WorkplaceEquity #SocialMobility #TalentStrategy
7️⃣ Bananas – Heartlessness, Artlessness
Sold by an immigrant for 25¢… bought for millions by a crypto “entrepreneur.”
A parable of our time, from the NYT:
A widower from Dhaka, Bangladesh, Mr. Alam was a civil servant before he moved to the United States in 2007 to be closer to one of his two children... his home is a basement apartment with five other men … in the Bronx … he pays $500 a month in rent... His fruit stand shifts are 12 hours long, four days a week; for each hour on his feet, in all weather, the owner pays him $12.
Happy Thanksgiving.
Thanks for reading!
Adrian
